Automobiles are becoming more expensive every year in the United States. While it may be tempting to take out massive loans to finance the best models, there’s a lot more to consider than just the sticker price. You must also consider insurance, taxes, tags and title fees, maintenance, and repairs (if you take out a loan that ranges beyond the period of warranty coverage). The experienced agents from Altra Insurance Services, a premier provider of car insurance San Diego drivers trust for reliable coverage, take a closer look at what an automobile really costs and what you can afford.
Most experts agree a new car loan payment should never exceed 15 percent of your monthly income. If you’re leasing a vehicle, it should never exceed 10 percent of your income. Most experts also agree you should optimally finance a vehicle for four years. If you go longer than this, never exceed seven years. The chances of something happening to the vehicle that will require major repairs that break your budget greatly increases at this point.
Maintenance costs can run you as much as $500 a year or more. The synthetic oil used in new vehicles is expensive. Specific brands, such as Elf, are sometimes required for oil changes in German cars, such as Audis and Volkswagens, to maintain their factory warranties. An oil change with Elf premium synthetic can easily run you over $100 with a new filter and labor. There may be additional filter changes, tire rotations, fluid flushes, and brake part replacements that aren’t covered under warranty. These can start to add up if your dealer charges $150 an hour for labor and marks up parts by 800 percent.
Easy Method to Calculate Costs
Experts agree a four-year loan is optimal, so that’s nearly 50 months. If you can put down 10 or 20 percent on a vehicle, you’ll take out a loan for the additional cost. Therefore, if you’re looking at a new vehicle that costs $30,000 and you pay $6,000 down, you have $24,000 to pay in four years. If you divide that by 50, you come up with $480, which means you’ll be paying roughly $480 a month just in car payments plus interest. If you have excellent credit, the interest rate should be affordable. However, the average interest rate is 4.81 percent on a 60-month loan. A lower payment term will usually lower the interest rate. Paying 4.81 percent interest on a $24,000 loan comes out to approximately $1,000 per year. After four years, you will have paid roughly $28,000 altogether.
Calculating all the real expenses of car ownership is an important part of the buying process. Figure out what you can really afford after all the extras are added. In addition, don’t forget to consider your gas budget, roadside assistance, and most of all, your insurance, which can fluctuate based on your locality, miles driven, driving record, credit, and age.
Whether they need affordable, reliable auto insurance or dependable motorcycle, business, or homeowners insurance, San Diego residents turn to Altra Insurance Services. For high-quality coverage and unparalleled service, reach out to our experienced agents. Call us today at 619-474-6666 to learn how you can save money on all your insurance needs.